RBS fined £5.6m for failing to Transaction Report

25/07/2013

The Financial Conduct Authority (FCA) has fined the Royal Bank of Scotland (RBS) £5,620,300 for incorrectly reporting transaction reports and, in some cases, failing to transaction report. This is the first Transaction Reporting fine under the new regulator, the FCA and highlights the ongoing importance of ensuring accurate, complete and timely reporting of transactions to the Regulator.One of the FCA’s overall objectives is to ensure that markets function properly. Accurate and complete transaction reporting by firms is an essential tool in identifying and investigating market abuse. Other similar firms which have been fined for Transaction Reporting failures include Barclays, Credit Suisse, Societe Generale and Commerzbank.

Who does this impact?

Firms must transaction report to the Regulator when they execute a reportable transaction in a principal or agency capacity.

Summary of Final Notice

RBS failed to accurately report 44.8 million transactions between November 2007 and February 2013. RBS also failed to report 804,058 transactions between November 2007 and February 2012.

Some of the RBS challenges were further complicated by the takeover of ABN AMRO Bank N.V. in October 2007. Following the takeover of ABN AMRO NV, RBS had 38 different systems feeding data used in transaction reporting and three different Approved Reporting Mechanisms (ARMs). This resulted in complex IT infrastructures involving multiple systems interfaces.

The majority of failures were attributed to failing to use the correct reference code to identify counterparties

Incorrect timestamps

Use of incorrect Firm Reference Number

Incorrect venue identifiers

Incorrect prices

Duplicate reporting

Incorrect codes for OTC derivatives

Incorrect instrument descriptions for OTC derivatives

The FCA also commented on inadequate Systems and Controls and lack of Senior Management oversight, including:

From November 2007 to June 2010, RBS failed to establish clearly defined roles and responsibilities amongst Senior Management for Transaction Reporting.

Poor documentation.

Failure to provide adequate training to staff.

Impact for firms

The FCA Transaction Monitoring Unit (TMU) has repeatedly reminded firms of the importance of data integrity, completeness and timeliness of Transaction Reporting to help combat market abuse.This Final Notice, along with the TMU forums, reinforces the importance of Transaction Reporting.

In summary, firms should take proactive measures to ensure the following:

Clear Roles and Responsibilities. Transaction Reporting often involves Operations, IT, Compliance, Control and Static Data Management. It is therefore imperative that the roles and responsibilities are formally agreed upon and fully transparent;

Senior Management Governance and Oversight. Senior Management should ensure effective oversight through clear written policies and procedures, training and Management Information; and

Front to Back assurance testing. Comprehensive testing for accuracy, completeness and timeliness at regular intervals, including before any relevant IT change, business change or regulatory change.